THE IMF believes that further austerity could stall Ireland's recovery.
And a top economist has also warned today that the Government must work much harder to get the EU to ease Ireland's debts.
Ministers must "push much harder" for the EU pledge to make the State's debts more sustainable, said Trinity College academic Dr Constantin Gurdgiev.
His call follows the latest IMF report which said the Government must not impose further austerity, even if growth targets are missed next year.
Dr Gurdgiev said the IMF's eighth review of Ireland's performance was "much more realistic." He welcomed an IMF statement that called for "forceful delivery of European pledges to improve programme sustainability".
He added that the Government must redouble its efforts to get Europe to deliver on its promises to help relieve Ireland's debt fight.
"So far, the Government has made no tangible progress," he warned today. He also criticised taxation measures in the Budget which, he said. "penalised work and entrepreneurship".
Fianna Fail public expenditure spokesman Sean Fleming told the Herald: "It is absolutely incumbent that the Government adheres to this warning by the IMF.
"The IMF has previously said that the cuts have done more damage than expected in Ireland. It is the most experienced body out of the Troika in dealing with countries like Ireland, so the Government must not get the jitters and decide to do anything drastic in terms of further cuts."
The IMF authorised the release of a further €890m funding for Ireland under the bailout terms.
It said Ireland had so far shown "steadfast policy implementation" with the conditions of the bailout programme, despite slower growth this year.
It is predicting more gradual economic recovery with growth of 1.1pc in 2013 and 2.2pc in 2014.
But with many economists forecasting growth of less than 1pc in 2013, there is a real threat to Ireland's chances of getting out of bailout and back to the markets as planned in 2014.
IMF deputy managing director David Lipton said: "The authorities have demonstrated their commitment to put Ireland's fiscal position on a sound footing, with the 2012 deficit target expected to be met even though growth has been low.
"Nonetheless, if next year's growth were to disappoint, any additional fiscal consolidation should be deferred to 2015 to protect the recovery."
The IMF chiefs also said the Irish banking sector needs to be reformed and shored up to help improve lending.
See Dan White: Page 14